Analyst Richard Whittington also cut the price target for the chipmaker to $26 from $30. Whittington wrote that Intel's server chip business is losing ground to cloud solutions which have "visibly slowed high margin data center CPUs." He also noted that Intel may be in danger of losing its foundry customer Altera (ALTR).
"The strategic problem facing the company," Whittington writes, "seems to be enticing Apple (AAPL) to use Intel's foundry mechanism at acceptably high margins."
The downgrade comes a week after Intel's quarterly earnings report when the company announced earnings of 51 cents a share on $13.8 billion in revenue. The report missed Thomson Reuters estimates of 52 cents a share earnings on $13.71 billion in revenue.
TheStreet Ratings team rates INTEL CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate INTEL CORP (INTC) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- INTC's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 2.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Although INTC's debt-to-equity ratio of 0.23 is very low, it is currently higher than that of the industry average. To add to this, INTC has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has slightly increased to $6,162.00 million or 2.25% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -24.53%.
- The gross profit margin for INTEL CORP is currently very high, coming in at 75.56%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 18.97% trails the industry average.
- You can view the full analysis from the report here: INTC Ratings Report